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Pushing back the frontiers of poverty and unemployment through accelerated growth Economic Strategy for 2003 Presentation to the Portfolio Committee on Trade and Industry 18 February 2003 1 Background to Microeconomic Reform Strategy Chronology • Jan 2001 – Government adopts an Integrated Economic Action Plan to address specific microeconomic constraints to growth • Jan 2002 – Plan is consolidated into Microeconomic Reform Strategy and implementation is accelerated • Jan 2003 – Sharpen implementation of the strategy focusing on employment creation and poverty eradication 2 Microeconomic Reform Framework Input Sectors: Cross-cutting issues: Growth Sectors: Transport Energy Telecomms Water HRD Technology and R&D Access to Capital Infrastructure Agriculture Tourism Cultural ICTs Mining & metals Clothing & textiles Chemicals & biotech Auto & transport Key Performance Areas Growth Employment Competitivenes s Geographic Spread BEE SMMEs Vision 2014 3 SA’s economic performance 1 Eight years of consistent growth • • • • 2.5% growth per annum 1993 – 2001 0.5% growth in GDP per capita 1993 – 2001 Growth outlook is positive Mixed sectoral contributions to growth in output 4 SA’s economic performance 2 Restructured Economy • Easing of the balance of payments constraint • Increasing contribution of manufacturing and services to GDP • Increasing productivity and improved perceptions of SA’s global competitiveness • Significant increase in exports of manufactured goods and services 5 SA’s economic performance 3 Growth has not been shared • Employment still a challenge • Industry restructuring has involved jobshedding • Increased casualisation of employment and associated lowering of incomes • Growth centered around traditional economic hubs (GP, WC, KZN) 6 Unemployment formal sector employment has shrunk 1994 to 2001 2001 Under employed 14% 1994 Unemployed (narrow) 17% Under employed 21% Formal Employment 69% Unemployed (narrow) 30% Formal Employment 49% Notes: •Underemployed refers to domestic worker, informal sector & subsistence agriculture •Unemployment by broad definition would include ‘discouraged’ workers and increased from about 28.6% to 41.5% While informal sector grew substantially over this period, it is now leveling off and even declining to a small degree. Source: Labour Force Survey 7 Labour market status among those aged 15 - 65 years 20.0 Millions 16.2 16.1 11.9 11.8 4.1 4.1 , 15.0 13.5 12.6 11.5 , 10.0 , ' 9.3 11.7 , 9.2 ' , , 10.4 9.4 ' 3.2 3.2 1998 1999 ' 5.0 2.2 2.5 & & 0.0 1996 1997 & & ' & 2000 ' & 2001 Labour market status Ec. active ' Employed& Unemployed , The employed and the unemployed = the economically active population( those aged 15 - 65 years) The economically active and the not economically active = the working age population 8 Inequality Unemployment by Race Group - 1999 87% of the unemployed are African African 87% White 3% Indian 2% Coloured 8% Source: Labour Force Survey 9 Inequality Unemployment by age-group 10 Geographic Inequality Unemployment Rate by Province – 1999 Official 40 35 PERCENTAGE 30 25 Official 20 15 10 5 .P ro v N ap e E. C .W es t N KZ N M P fri ca S. A F. St at e au te ng G ap e .C N W .C ap e 0 Source: Stats SA 2002 11 Geographic Inequality Growth in GDP per province GDP per Province 2001 L 6.3 MP 0.6 GP NW -1.6 Province 3.3 KZN -0.6 3.6 FS NC 2.7 5.3 EC WC -2 -1 2.6 0 1 2 3 4 5 6 7 GDP Series1 Source: Stats SA 12 Some assumptions about economic growth 1 Poverty eradication and employment creation can only be achieved if we accelerate the economic growth rate Unemployment Per capita GDP Growth in GDP 2002 2007 2014 2002 2007 2014 Time 13 Some assumptions about economic growth 2 Growth must lead to employment creation through increased output and increased labour-absorption Formal employment trends by sector 5000 4500 Total em ployed '000 4000 3500 3000 2500 2000 1500 1000 500 0 1984 1994 2001 Year Primary Secondary Tertiary 14 Some assumptions about economic growth 3 There is a clear link between educational attainment, work experience, employment and income 2590 Education Attainme nt Tertiary 1391 Grade 12 (matric) 951 Incomplete secondary 3422 Informal sector 2091 Formal sector 714 1337 Primary 535 1006 No schooling 0 Source: LFS 4, 2001 6470 2000 4000 6000 8000 Monthly Earnings (Rand) 15 Some assumptions about economic growth 4 There is a clear link between the provision of economic infrastructure and levels of economic activity •The provision of infrastructure: •improves the quality of life of people •promotes productivity levels in the economy •reduces pressure on the environment •is essential for the functioning of markets •Without adequate and well-maintained infrastructure: •people are not aware of economic opportunities •people cannot access and exploit economic opportunities •economic development is constrained 16 Some assumptions about economic growth 5 A strong and active state is required to place the economy on a job-creating and redistributive growth trajectory Institutional Challenges • Decisive government action and capacity to manage and implement • Inadequate reliable and credible statistics • Insufficient relevant management information for use by public managers in decision-making 17 Priorities for 2003/4 1. Address critical skills shortages 2. Build on export success 3. Expand the services sectors 4. Provide critical economic infrastructure 5. Expand economic opportunities 6. Strengthen regulation and management of parastatals 7. Joint planning and implementation by government departments 8. Boost investor confidence 9. Immediate job creation 18